Samsung's exploding Note 7 blamed on hot competition with Apple

By Jack Loughran

Published Tuesday, September 6, 2016

Samsung’s accelerating phone development cycles resulting from its attempt to compete with Apple has taken a hit to its quality testing procedures which may have led to the recent recall of the Note 7.

In its rush to beat rival products to market, notably Apple's new iPhone, Samsung has brought forward the launch of its Galaxy S and Galaxy Note series models by roughly a month.

The iPhone 7 and 7 plus are expected to be announced tomorrow at an ‘invitation-only event’ in San Francisco with other rumours pointing to a refresh of the Apple Watch too. The company even appears to be revving up its official twitter handle, @Apple, which was registered years ago but has only recently been confirmed. Speculation is rife that it will be live tweeting tomorrow’s event for the first time.

In June, Samsung made its best profit in more than two years due to its new strategy of beating Apple’s time frames, but it is also putting strain on its supply chain and its manufacturing reputation.

On Friday, two weeks after launch, Samsung recalled Galaxy Note 7 smartphones in 10 markets including South Korea and the United States after finding its batteries were prone to ignite, and halted sales of the £699 device in those markets indefinitely.

The recall looks set to hamstring a revival in Samsung's mobile business just as Apple gears up to launch its new iPhones.

"Samsung might have over-exerted itself trying to pre-empt Apple, since everybody knows the iPhones launch in September," said Chang Sea-Jin, business professor at Korea Advanced Institute of Science and Technology.

"It's an unfortunate event; it feels like Samsung rushed a bit, and it's possible that this led to suppliers also being hurried."

Samsung said it conducts ‘extensive preparation’ for its products and will release them to the market ‘only after proper completion of the development process’. The firm has admitted that it had identified a problem in the manufacturing process of one of its battery suppliers for the Note 7.

The scale of the unprecedented recall, which some analysts forecast will cost Samsung nearly $5bn (£3.7bn) in revenue this year, follows a separate supply-chain management issue that led to disappointing sales of the Galaxy S6 series last year.

Samsung executives said production problems for the curved screens and metal casings used in the Galaxy S6 edge led to a supply shortage for the device, leaving the firm unable to capitalise on the critical acclaim the phone received, sapping earnings momentum.

Counterpoint analyst Jeff Fieldhack said Samsung stole the thunder from local rival LG Electronics' launch of the G5 smartphone this year by starting the sales of the Galaxy S7 smartphones a month earlier and backing them with an aggressive marketing campaign.

"I believe they were trying to create a similar effect by beating Apple to market by (about) a month, too," he said.

"Very often, lab times and testing periods are shrunk to expedite approval and time-to-market of key devices. It is possible all charging scenarios were not thoroughly tested."

Last month the company unveiled a prototype ‘digital eye’ using IBM’s TrueNorth ‘cognitive chip’ that can process digital imagery at an outstandingly fast rate of 2,000 frames per second.